Correlation Between Equity Lifestyle and Mid America
Can any of the company-specific risk be diversified away by investing in both Equity Lifestyle and Mid America at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Equity Lifestyle and Mid America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Lifestyle Properties and Mid America Apartment Communities, you can compare the effects of market volatilities on Equity Lifestyle and Mid America and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Equity Lifestyle with a short position of Mid America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Lifestyle and Mid America.
Diversification Opportunities for Equity Lifestyle and Mid America
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Equity and Mid is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Equity Lifestyle Properties and Mid America Apartment Communit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid America Apartment and Equity Lifestyle is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Equity Lifestyle Properties are associated (or correlated) with Mid America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid America Apartment has no effect on the direction of Equity Lifestyle i.e., Equity Lifestyle and Mid America go up and down completely randomly.
Pair Corralation between Equity Lifestyle and Mid America
Considering the 90-day investment horizon Equity Lifestyle Properties is expected to generate 0.96 times more return on investment than Mid America. However, Equity Lifestyle Properties is 1.04 times less risky than Mid America. It trades about 0.03 of its potential returns per unit of risk. Mid America Apartment Communities is currently generating about 0.03 per unit of risk. If you would invest 6,235 in Equity Lifestyle Properties on August 31, 2024 and sell it today you would earn a total of 898.00 from holding Equity Lifestyle Properties or generate 14.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Lifestyle Properties vs. Mid America Apartment Communit
Performance |
| Timeline |
| Equity Lifestyle Pro |
| Mid America Apartment |
Equity Lifestyle and Mid America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Lifestyle and Mid America
The main advantage of trading using opposite Equity Lifestyle and Mid America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Lifestyle position performs unexpectedly, Mid America can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Mid America will offset losses from the drop in Mid America's long position.| Equity Lifestyle vs. UMH Properties | Equity Lifestyle vs. UDR Inc | Equity Lifestyle vs. AvalonBay Communities | Equity Lifestyle vs. Nexpoint Residential Trust |
| Mid America vs. AvalonBay Communities | Mid America vs. Essex Property Trust | Mid America vs. Equity Residential | Mid America vs. UDR Inc |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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